5 Stocks Under $10 Set to Soar - views

WINDERMERE, Fla. (Stockpickr) -- Every day on Wall Street, certain stocks trading for $10 a share or less experience massive spikes higher. Traders savvy enough to follow the low-priced names and trade them with discipline and sound risk management are banking ridiculous coin on a regular basis.

Just take a look at some of the hot movers in the under-$10 complex from Wednesday, including Cardica (CRDC), which skyrocketed by 34.5%; BioFuel Energy (BIOF), which soared by 33.4%; Stereotaxis (STXS), which exploded higher by 28.2%; and Republic Airways (RJET), which surged by 19.5%. You don’t even have to catch the entire move in lower-priced stocks such as these to make outsized returns when trading.

One low-priced stock that recently exploded to the upside was Zipcar (ZIP), which I highlighted in Nov. 29's “5 Stocks About to Burst” at around $8.30 a share. I mentioned in that piece shares of ZIP had been uptrending strongly since the start of November, with the stock soaring from $5.90 a share to $8.64 a share. That move was quickly pushing ZIP within range of triggering a near-term breakout trade that would have given the stock a chance to re-fill some of its previous gap down zone from August that started near $10 a share. I mentioned that traders could buy ZIP off weakness as long as it was trending within range of its 50-day moving average at $7.26 a share or they could buy once it triggered a high-volume breakout above $8.64 to $8.69 a share.

Guess what happened? Shares of ZIP continued to uptrend, with the stock hitting a recent high of $8.95 a share and never breaking below its 50-day moving average. On Wednesday, the company announced that Avis had agreed to buy the car-sharing firm for $500 million, or $12.25 per share, which represents a 49% premium over the value of the stock on Monday. Anyone who took the breakout trade in ZIP would have cashed in on almost 50% of gains in about a month. That’s a massive win in a market that has been struggling of late to produce big winners.

Low-priced stocks are something that I tweet about on a regular basis. I frequently flag high-probability setups, breakout candidates and low-priced stocks that are acting technically bullish. I like to hunt for low-priced stocks that are showing bullish price and volume trends, since that increases the probability of those stocks heading higher. These setups often produce monster moves higher in very short time frames.

I’m not as eager to recommend investing long-term in stocks that trade less than $10 a share because these names can be very speculative, and the odds for picking the long-term winners aren’t great. But I definitely love to trade stocks that are priced below $10. I like to view them as a trading vehicle with lots of volatility and lots of upside when the trade is timed right.

When I trade under-$10 names, I do it almost entirely based off of the charts and technical analysis. I also like to find under-$10 names with a catalyst, but that’s secondary to the chart and volume patterns.

One under-$10 stock that’s trending very close to triggering a major breakout trade here is ServiceSource International (SREV), which helps hardware, software, health care and life sciences companies derive from their customers more revenue from maintenance, support and subscription agreements. This stock has been hammered by the bears during the last six months, with shares down by 55%.

If you take a look at the chart for ServiceSource International, you’ll notice that this stock has been uptrending strongly for the last month and change, with shares soaring from a low of $4.01 to its recent high of $6.10 a share. During that uptrend, shares of SREV have been mostly making higher lows and higher highs, which is bullish technical price action. That move has now pushed SREV within range of triggering a major breakout trade.

Traders should now look for long-biased trades in SREV if it manages to break out above some near-term overhead resistance levels at its 50-day moving average of $5.96 a share and then once it clears some more overhead resistance at $6.10 a share with high volume. Look for a sustained move or close above those levels with volume that registers near or above its three-month average action of 1,066,040 shares. If that breakout triggers soon, then SREV will set up to re-fill some of its gap down zone from early November that started near $9 a share. Some possible upside targets if SREV gets into that gap with volume are $8 to $9 a share.

Traders can look to buy SREV off any weakness as long as it’s trending above some near-term support at $5.66 a share. I would use a stop that sits just below that level. You can also buy off strength once SREV clears those breakout levels with volume and then simply use the same stop that sits right below $5.66 a share.

Advanced Micro Devices

Another under-$10 stock that’s moving within range of triggering a near-term breakout trade is Advanced Micro Devices (AMAMD), which provides processing solutions for the computing and graphics markets. This stock has taken it on the chin during the last six months, with shares off by 58%.

If you take a look at the chart for Advanced Micro Devices, you’ll notice that this stock has been uptrending strongly for the last month and change, with shares soaring from a low of $1.81 to its recent high of $2.57 a share. During that uptrend, shares of AMD have been mostly making higher lows and higher highs, which is bullish technical price action. That move has now pushed AMD within range of triggering a near-term breakout trade.

Market players should now look for long-biased trades in AMD if it manages to break out above some near-term overhead resistance levels at $2.57 to $2.75 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action 28.6 million shares. If that breakout triggers soon, then AMD will set up to re-test or possibly take out its next major overhead resistance levels at $3 to $3.25 a share. Any move above $3.25 will then put $3.50 to $4 into focus for shares of AMD.

Traders can look to buy AMD off any weakness as long as it’s trending above its 50-day moving average of $2.19 a share I would simply use a stop that sits just below that level if you buy off weakness. One can also buy off strength once AMD clears those breakout levels with volume and then simply use a stop that sits just below some key near-term support at $2.25 a share.

ImmunoCellular Therapeutics

One under-$10 name that’s trending very close to triggering a near-term breakout trade is ImmunoCellular Therapeutics (IMUC), which is seeking to develop and commercialize new therapeutics to fight cancer using the immune system. This stock is off to a decent start in 2013, with shares up 9%.

If you take a look at the chart for ImmunoCellular Therapeutics, you’ll notice that this stock has been downtrending a bit for the last month, with shares dropping from a high of $2.28 to its recent low of $1.83 a share. During that downtrend, shares of IMUC have been consistently making lower highs and lower lows, which is bearish technical price action. That said, the stock has now started to move back above its 50-day moving average of $1.94 a share and it’s quickly moving within range of triggering a near-term breakout trade.

Traders should now look for long-biased trades in IMUC if it manages to break out above some near-term overhead resistance levels at $2.20 to $2.28 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 533,470 shares. If that breakout hits soon, then IMUC will set up to re-test or possibly take out its next major overhead resistance levels at its 200-day moving average of $2.73 a share or at $2.93 to $2.94 a share. Any move above $2.94 will then put $3.26 to $3.50 into focus for shares of IMUC.

Traders can look to buy IMUC off any weakness and simply use a stop that sits just below its 50-day moving average of $1.94 a share. One could also buy IMUC off strength once it clears those breakout levels with volume and then simply use a stop that sits just below $2 a share.

QuickLogic

Another under-$10 name that’s trending very close to triggering a major breakout trade is QuickLogic (QUIK), which develops and markets low power programmable solutions that enable customers to add features to their mobile, consumer and industrial products. This stock has been trending lower during the last three months, with shares off by 15.6%.

If you take a look at the chart for QuickLogic, you’ll see that this stock has just started to bounce strongly off its 50-day moving average of $2.24 a share with decent upside volume. Volume today has already hit 140,000 shares traded which is not far from its three-month average action of 190,672 shares. This bounce is quickly pushing shares of QUIK within range of triggering a major breakout trade.

Market players should now look for long-biased trades in QUIK if it manages to break out above some near-term overhead resistance levels at $2.45 to its 200-day moving average at $2.58 a share with high volume. Look for a sustained move or close above those levels with volume that registers near or above its three-month average action of 190,672 shares. If that breakout triggers soon, then QUIK will set up to re-test or possibly take out its next major overhead resistance levels at $3.02 to $3.05 a share or possible even $3.29 a share.

Traders can look to buy QUIK off any weakness and then simply use a stop that sits just below its 50-day at $2.24 a share or around some key near-term support at $2.14 a share. One could also buy QUIK off strength once it takes out those breakout levels with volume and then simply use a stop that sits just below its 50-day at $2.24 a share.

Forest Oil

One final under-$10 name that’s trending very close to triggering a near-term trade is Forest Oil (FST), which is engaged in the acquisition, exploration, development, and production of natural gas and liquids mainly North America. This stock has been hit by the sellers during the last three months, with shares off by 12.9%.

If you take a look at the chart for Forest Oil, you’ll notice that this stock has been trending sideways for the last two months, with shares moving between $6.06 on the downside and $7.35 on the upside. This stock has just started to bounce strongly off its 50-day moving average of $6.91 a share and it’s quickly moving within range of breaking out above the upper-end of its sideways pattern.

Traders should now look for long-biased trades in FST if it manages to break out above some near-term overhead resistance at $7.35 a share with high volume. Look for a sustained move or close above $7.35 a share with volume that hits near or above its three-month average action of 3.3 million shares. If that breakout hits soon, then FST will set up to re-test or possibly take out its next major overhead resistance levels at its 200-day of $8.33 a share or at $9.12 to $9.32 a share.

Traders can look to buy FST off any weakness and simply use a stop that sits just below some near-term support levels at its 50-day of $6.91 or near $6.75 a share. One could also buy FST off strength once it clears those breakout levels with volume and then simply use a stop that sits just below its 50-day at $6.91 a share.

At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Windermere, Fla., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including CNBC.com and Forbes.com. You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.